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ethics Greek word

Ethos = accepted behavior

Ethics meaning

set of standards of human conduct that governs behavior of ind or org

Regulate behavior of ind or org distinguish b/w right and wrong

Business ethics

Definition > Robert ginger > principles concerned with moral

judgement and good conduct

Meaning > moral principles & social values that business should adopt
in its code of conduct

ethics > focus > profit max, higher growth also on upliftment of its
surroundings

Ethics helps business in deciding what is right and what is wrong for it.

Ethics helps business to maintain better and harmonious relations with

society customers and employees.

Ethics play imp role in raising Profitability productivity and goodwill of

business

Features of business ethics

1) Maintains legality of business

Ethics ensure business does not involve in illegal activities

Defines rules and principles business needs to adopt in its code of

conduct

avoid the adoption of unfair trade activities like adulteration, black

marketing, frauds and cheating in the product

This all helps in maintaining the legality of the business.

2) Reduce risk and cost

ethics helps in improving productivity and overall efficiency of org

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 ethics brings self-discipline in org

all are required to follow ethics and are imposed penalty in case of
failure

3) providing quality products

quality products = happy and satisfied customers

ethics define certain standards for production of better products

business should use better technology and resources for manufacturing

their products

4) healthy competition

unhealthy competition in market = worse for existence of small business

fair market practices = healthy competition

cooperate with business partners and other business org in market

ethics should ensure that no business should aim at creating monopoly

in market by exploiting others

5) profit making

business should not earn profit by unfair means. remain honest and not
involve in fraudulent activities for raising profit.

6) good employer- employee relations

implementation of ethics makes employer and employee relations better

ethics ensure business should not only work for its growth but also for
welfare of employees

employee provide = better wages and salaries, proper working

conditions

all this helps in developing better relations and understanding among

employers and employees.

7) long term growth

ethics focus = survival of business for long term

no exploitation

support of all stakeholders for success can continue for long term

Nature of business ethics

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 1) code of conduct

it tells us what to do and what not to do for the welfare of the society. all
business must follow code of conduct

2) based on moral and social values

it contains moral and social principles for doing business. this includes self-
control, consumer protection and welfare, service to society, not to exploit
social groups.

3) gives protection to social groups

gives protection to social groups such as consumers, employees, small

businessman, shareholders, creditors.

4) provides basic framework

it gives social cultural economic legal and other limits of business. business
must be conducted within these limits.

5) voluntary

business ethics must be voluntary. business men must accept ethics on their
own. it must be like self-discipline and it must be enforced by law.

6) requires education and guidance

businessmen must be given proper education and guidance before

introducing business ethics. the businessmen must be motivated to use
business ethics. they must be informed about the advantages of using
business ethics.

7) relative term

business ethics changes from one business to another. it also changes from
one country to another. what is considered good in one country may be
taboo in another country.

8) diagnostic in nature

after examining various aspects of business dealings operations and

management techniques it is possible to know the ethical or non-ethical
nature of the business.

need and importance

1) Survival of business

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 Business ethics are mandatory or compulsory for the survival of any
business.

businessmen who do not follow it will only have short-term success, but
they will fail in the long run. This is because they can cheat a consumer
only once. After realizing being cheated, the consumer will not buy
goods or services from that businessman. He will also tell others not to
buy from that businessman. So, this will defame his goodwill or image
and provoke negative publicity in the market. This will result in the failure
and even closure of the business.

Therefore, if the businessmen do not follow ethical rules, he will fail in

the market.

2) Safeguarding consumers' rights

The consumer has many rights such as the right to health and safety,
right to be informed, right to choose, right to be heard, right to redress,
right to be satisfied, etc. But many businessmen do not respect and
protect these rights of their consumers.

Business ethics are must to safeguard these basic rights of the

consumers. A business who safeguards its consumers' rights, in fact,
safeguards its own existence.

3) Improve customers' confidence

Business ethics are needed to improve the customers' confidence about

the quality, utility, reliability, quantity, price, etc. of the products.

The customers have more trust and confidence in the businessmen who
follow ethical business rules or principles.

They feel safe that such businessmen will not cheat them. Ethics binds
businessmen to maintain trust by offering quality products and services
to customers.

4) Develops good relations

Business ethics are important to develop good and friendly relations

between business and society.

This will result in a regular supply of good quality goods and services at
low prices to the society. It will also result in good profits for the
businesses thereby resulting in the growth of the economy. If the

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 economy keeps growing, it ultimately improves the standard of living of
the society.

5) Creates good image

Business ethics create a good image for the business and businessmen.
If the businessmen follow all ethical rules, then they will be fully
accepted and not criticised by society.

The society will always support those businessmen who follow the
necessary code of conduct and avoid engaging in unscrupulous
activities.

If the business succeeds in creating and maintaining its goodwill in the

society, it flourishes well even in the most competitive markets.

scope

1) Ethics In Compliance
Business ethics play an efficient role in the compilation of business activities
with legal rules and regulation. It ensures that business adheres to all
established laws and any of its operations don’t go unlawful. It reduces any
chance of facing any unfavourable action by authorities like payment of fines
and penalty. Business following ethics in their operations frames strategies
and policies in accordance with established rules and regulations. All
activities are monitored and ensured that they go in accordance with framed
policies.

Compliance means conforming to relevant laws, regulations, policies,

standards, procedures, or contractual obligations. These may be external or
internal obligations. Organizations that follow high Ethics comply with the law
and ensure an ethical climate inside throughout the organization.

2) Ethics In Human Resource

Human resources are the key element of every business and have an
important role in its success. Ethics helps in improving the employer-
employee relations and overall productivity of the business. Ethics
related to human resource are introduced and implemented by Human
resource management in business. HRM covers all ethical issues
related to employer-employee affecting their relationship.

The various issues covered are Discrimination issues, sexual

harassment, employee’s privacy issues, salaries and wages issues,

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 safety and health issues. Ethics aims at overcoming all these issues so
that employees are happy and motivated towards their roles. This
booms the overall performance and reduce the risk.

It deals with the enforcement of the rights of employees in an enterprise.

Such rights are as follows:
a. Having a right to work and be compensated for the same
b. Possessing a right for free association and participation
c. Enjoying a right for fair treatment in an enterprise
d. Holding a right to work in a hazard-free environment
e. Blowing whistle (an activity where an employee can raise voice
against any wrong practice of anyone in an enterprise)

3) Ethics In Finance

Finance is a crucial part of every business and is needed for its successful
operations. Finance should be properly managed by every business
otherwise it may have adverse effects. Ethics aims at controlling and
handling all finance issue faced by companies and employees. The various
ethical issues included are accounting related like window dressing and
improper window dressing, insider trading, fake reimbursements, overbilling,
bribery, kickbacks etc.

It deals with various ethical dilemmas and violations in day-to-day financial

transactions. An
example of ethical violations is data fudging in which enterprises present a
fabricated statement
of accounts and other records, which are open to investigation. Ethics in
financial transactions
gained importance when due to their insufficiency nations suffered massive
economic
meltdowns.
The following are the ethics in finance:
a. Following truthfulness and authenticity in business transactions
b. Seeking the fulfillment of mutual interests
c. Getting the economies and financial units freed from greed-based
methodologies.

4) Ethics In Production

Ethics in business helps in monitoring and controlling the overall

production activities. It ensures that production processes do not

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 adversely affect the business. Ethics frames production policies by
considering organisation goals, objectives and various environmental
factors.

Attempts are made to minimise the degree of risk and danger. The
various ethical issues covered are defective and dangerous products,
environmental ethics and pollution issues, Issues arising out of new
technologies and product testing issues. Implementation of ethics
controls these issues and fosters overall productivity.

It deals with the responsibility of an organization to make sure that

products and processes of
production is not causing harm to the environment.
It throws light on the following issues:
a. Avoiding rendering services or producing products that are hazardous
to health. For example,
tobacco and alcohol
b. Maintaining ethical relations with the environment and avoiding
environmental pollution

5) Ethics In Marketing

Marketing is an important part of every business organization. It is the

means through which it improves the sales and profitability of the
business. Marketing practices should be ethical and should avoid the
adoption of any unfair means.

Implementation of ethics ensures that all marketing programmes are

moral-ethical. The various ethical issues covered are pricing issues like
price discrimination and price skimming, misleading advertisements,
black marketing, anti-competitive practices, wrong advertisement
content etc.

ethical principles in business

HONESTY
All personnel must be committed to telling the truth in all forms of
communication and in all actions. This includes never purposely telling
partial truths, selectively omitting information, making misrepresentations or
overstatements. Honesty also means reliably sharing both good and bad
news with equal candor.

FAIRNESS

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 All dealings and relationships must be founded on a conscious commitment
to fairness, treating others as you would like to be treated. Fairness requires
treating all individuals equally and courteously, never exercising power
arbitrarily and never exploiting weaknesses or mistakes for personal or
corporate benefit.

LEADERSHIP

Demonstrated by a conscious effort to set a positive example of ethical

behavior, leadership is a commitment to excellence through ethical decision-
making. Businesses and business executives maintain their leads by
constantly improving operational efficiency, worker satisfaction and customer
approval

INTEGRITY
Organizations and personnel demonstrate integrity through a consistency
between actions and words that inspires trust and credibility. Integrity also
means keeping promises, honoring commitments, meeting deadlines and
refusing to participate in unscrupulous activities or business dealings.

COMPASSION
Fostering a business environment of empathy and compassion requires a
commitment to being kind and caring toward all personnel, business
partners and customers. Business goals must be benevolent, ensured by
spending enough time to understand the needs and sensitivities of others,
including the local community.

RESPECT

Respect is demonstrated by a full commitment to the human rights, dignity,

autonomy, interests and privacy of all personnel. It means recognizing that
everyone deserves equal respect and support for sharing ideas and
opinions, without fear of any penalty or form of discrimination.

RESPONSIBILITY

Employees exhibit responsibility by taking full ownership of their jobs,

striving to be conscious of the emotional, financial and business
consequences of their actions. Taking their responsibilities seriously also
demonstrates employee maturity and ability to do a job without needing strict
supervision.

LOYALTY

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 Loyalty is proven by never disclosing information learned in confidence and
by remaining faithful to coworkers, clients, business partners and suppliers.
Loyal employees avoid conflicts of interest, help build and protect the good
reputation of their company and help boost the morale of their coworkers.

LAW-ABIDING
Organizations must fully comply with all applicable laws and codes from
local, state and federal agencies. Law-abiding businesses and personnel
also adhere to industry and trade regulations, marketplace standards and
any additional mandatory organizational policies, practices and procedures.

ACCOUNTABILITY
Accountability requires a total commitment to the ethical quality of all
decisions, actions and relationships. High expectations for ethical behavior
drive business practices when an organization and its personnel are held
accountable to fellow employees, consumers, the local community and the
wider public in general.

TRANSPARENCY
Committing to transparency requires making business information and
policies available to appropriate groups, such as financial investors,
personnel and consumers. It includes, for example, sharing criteria for price
hikes, wages, hiring, granting promotions, addressing workplace
infringements and firing employees.

ENVIRONMENTAL CONSEQUENCES

Organizations and personnel demonstrate a commitment to the environment

by helping mitigate the effects of global climate change. Beneficial actions
include reducing the negative environmental impact of doing business by
improving energy efficiency to help lower carbon emissions, reducing water
usage and reducing waste.

why ethical problems occur

Obviously, ethics problems in business appear in many forms. Although not

common or universal, they occur frequently. Finding out what is responsible for
causing them is one step that can be taken toward minimizing their impact on
business operations and on the people affected. Some main reasons are as
follows:

Personal Gain and Selfish Interest

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 Personal gain, or even greed, cause ethics problems. Businesses
sometimes employ people whose personal values are less than desirable.
They will put their own welfare ahead of all others, regardless of the harm
done to their employees, the company, or society.
A leader or employee who puts his or her own self-interest above all other
considerations is called an ethical egoist. Self-promotion, a focus on self-
interest to the point of selfishness, and greed are traits commonly observed
in an ethical egoist.

The ethical egoist tends to ignore ethical principles accepted by others,

believing that ethical rules are made for others. Altruism—acting for the
benefit of others when self-interest is sacrificed—is seen to be sentimental
or even irrational. “Looking out for number one” is the ethical egoist’s motto.

Competitive Pressure On Profits

When organizations are squeezed by tough competition, they sometimes

engage in unethical activities to protect their profits. This may be especially
true in organizations whose financial performance is already sub-standard.

Research has shown that leaders of poor financial performers and

organizations with financial uncertainty are more prone to commit illegal
acts. In addition, intense competitive pressure in the global marketplace has
resulted in unethical activity, such as price fixing, falsifying documents, or the
use of kickbacks or bribes.

Pre-fixing is a practice that often occurs when companies vigorously engage

in a market with limited growth potential. Besides being illegal, pre-fixing is
unethical behaviour towards customers, who pay higher prices than they
would if free competition set the price. Companies fix prices to avoid fair
competition and to protect their profits.

Other kinds of unethical behavior also occur under competitive pressure.

Companies can coerce suppliers into lowering their prices through non-
market pressures, thereby receiving less than a fair price. When company
officials have a strict bottom-line mentality shaped almost exclusively by
market competition, they may overlook the ethical claims of their
stakeholders. Doing so has the unfortunate and needless effect of pitting
business against society.

Business Goals versus Personal Values

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 Ethical conflicts in business sometimes occur when a company pursues
goals or uses methods that are unacceptable to some of its employees.
Whistle-blowing may be one outcome if the employee goes to the public with
a complaint after failing to convince the company or correct the alleged
abuse.
Another recourse for employees caught in these situations is a lawsuit. This
option has become less of a financial and professional risk for employees in
recent years as a result of various governmental protection acts.

Conflicts of Interest
Ethical challenges in business often arise in the form of conflicts of interest.
A conflict of interestOpens in new window occurs when an individual’s self-
interest conflicts with acting in the best interest of another, when the
individual has an obligation to do so.

For example, if a purchasing agent directed their organization’s orders to an

organization from which she had received a valuable gift, regardless if this
organization offered the best quality or value, he would have acted
unethically because of a conflict of interest. In this situation, he would have
acted to benefit himself, rather than in the best interests of his employer.

A failure to disclose a conflict of interest may represent deception in and of

itself and may hurt the person or organization on whose behalf judgment has
been exercised. Many ethicists believe that even the appearance of a
conflict interest should be avoided, because it undermines trustOpens in
new window.

Many cases of unethical activity illustrate conflicts of interest, in which

opportunities for organizational self-enrichment conflict with the long-term
viability of the organization and the best interest of employees, customers,
suppliers, and stockholders. Many organizations seek to guard against the
dangers inherent in conflicts of interest by including prohibitions of any such
in their codes of ethics.

Cross-Cultural Contradictions

Some of the most challenging ethical problems occur as organizations do

business in other societies where ethical standards differ from those at
home.

Today, leaders in all multinational corporations, regardless of the nation

where they are headquartered, often face this kind of ethical dilemma. For

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 example, what may be an unsafe product in an organization’s home country
may not be forbidden in a receiving nation, especially if the organization
knows that the products are exported to another country where others are
exposed to serious health risks.

As business becomes increasingly global, with more and more organizations

penetrating overseas markets where cultures and ethical traditions vary,
these cross-cultural questions will occur more frequently. And as they do,
leaders will need to find answers to them!

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